Opinion
Civil Action 1:23-cv-748 (RDA/IDD)
02-21-2024
TK ELEVATOR CORPORATION, Plaintiff, v. WINDWARD TOWERS CONDOMINIUM OWNERS ASSOCIATION, INC. et al., Defendants.
MEMORANDUM OPINION AND ORDER
Rossie D. Alston, Jr., United States District Judge
This matter comes before this Court on Defendant Scottsdale Insurance Company's (“Scottsdale”) Motion to Sever (Dkt. 17). This Court has dispensed with oral argument as it would not aid in the decisional process. Fed.R.Civ.P. 78(b); Local Civil Rule 7(J). This matter has been fully briefed and is now ripe for disposition. Considering Scottsdale's Memorandum in Support of the Motion to Sever (Dkt. 18), Plaintiff TK Elevator Corporation's (“TKE”) Opposition (Dkt. 21), and Scottsdale's Reply (Dkt. 24), this Court DENIES Scottsdale's Motion to Sever (Dkt. 17) for the reasons that follow.
I. BACKGROUND
A. Factual Background
TKE alleges that Defendants Windward Towers Condominium Owners Association, Inc. (“Windward”) and Scottsdale breached contracts with TKE and seeks compensatory damages and a declaratory judgment against each Defendant. Dkt. 1 ¶¶ 35, 42, 51, 58. TKE is a Georgia corporation that services and installs elevators, escalators, and moving walks. Id. ¶ 7. Windward is a Virginia corporation located in Newport News, Virginia. Id. ¶ 4. Scottsdale is an Ohio corporation licensed to issue insurance policies in Virginia. Id. ¶ 5.
This matter arises from a separate action in which TKE was a named Defendant. Id. ¶ 18. That separate action (Douglass v. Thyssenkrupp Elevator Corp., et al., Case No. CL2004024T-01 (Cir. Ct. Newport News, Va.) (dismissed June 21, 2022)) (the “Douglass Action”) arose from allegations by Leroy H. Douglass that Windward and TKE were liable for physical injuries Mr. Douglass suffered. Id. ¶ 19. Mr. Douglass asserted that he sustained injuries when he tripped and fell due to the placement of a board that was taped to the floor adjacent to an elevator that TKE was servicing at Windward's property in Newport News, Virginia. Id. Windward and Scottsdale eventually settled the case. Id. ¶ 22. Part of the settlement included a release for TKE of all claims asserted or that could have been asserted by Mr. Douglass against TKE. Id. TKE alleges that, despite the release, TKE still incurred legal costs in defending against the Douglass Action. Id. ¶ 23.
TKE alleges in this action that Windward and/or Scottsdale are responsible for indemnifying TKE for the legal costs that TKE incurred in defending the Douglass Action. Id. ¶¶ 35, 51. In Count One, TKE alleges that Windward entered a Service Agreement with TKE that requires Windward to indemnify TKE against suits that arise out of maintaining the equipment TKE agreed to service. Id. ¶¶ 11, 35. These costs allegedly include attorney's fees, court costs, and other costs of litigation. Id. ¶ 12. TKE claims that Windward has breached the Service Agreement by failing to pay TKE's legal fees. Id. ¶¶ 33, 35. TKE also argues that Windward further breached the Service Agreement if it did not add TKE as an additional insured party. Id. ¶ 34. Alternatively, in Count Three, TKE claims that the Service Agreement is an “insured contract” covered under Windward's insurance policy from Scottsdale, making Scottsdale liable to TKE as a third-party beneficiary of the policy. Id. ¶¶ 44, 46. In Counts Two and Four, TKE asks this Court for declaratory judgments that TKE is entitled to recover from Windward and/or Scottsdale. Id. ¶¶ 42, 58.
B. Procedural Background
On June 8, 2023, TKE filed a Complaint in this Court against Windward and Scottsdale. Dkt. 1. On July 28,2023, Scottsdale filed the instant Motion to Sever the claims against Windward from the claims against Scottsdale, along with a Memorandum in Support of the Motion. Dkt. Nos. 17; 18. TKE filed its Opposition to the Motion to Sever on August 10, 2023. Dkt. 21. Scottsdale then filed a Reply on August 16, 2023. Dkt. 24. To date, Windward has not filed a brief with the Court regarding the Motion to Sever.
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 20(a)(2) provides that defendants may be joined in an action if:
(A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all defendants will arise in the action.
Fed. R. Civ. P. 20(a)(2). Courts allow the “broadest possible scope of action consistent with fairness to the parties; joinder of claims, parties and remedies.” United Mine Workers v. Gibbs, 383 U.S. 715, 724 (1966). Rule 20 is “construed in light of its purpose, which ‘is to promote trial convenience and expedite the final determination of disputes, thereby preventing multiple lawsuits.'” Saved v. BL, Ltd., 710 F.2d 1027, 1031 (4th Cir. 1983) (citation omitted).
B. Rule 21
Federal Rule of Civil Procedure 21 allows the Court to, “on motion or on its own,... add or drop a party. The Court may also sever any claim against a party.” Fed.R.Civ.P. 21. The “court has virtually unfettered discretion in determining whether or not severance is appropriate.” 17th St. Assocs., LLP v. Markel Inti Ins. Co., 373 F.Supp.2d 584, 598 n.9 (E.D. Va. 2005). In applying this discretion, district courts within the Fourth Circuit consider the following eight factors:
“(1) whether the issues sought to be tried separately are significantly different from one another; (2) whether the separable issues require different witnesses and different documentary proof; (3) whether the party opposing severance will be prejudiced if it is granted;... (4) whether the party requesting severance will be prejudiced if the claims are not severed[;] ... (5) fundamental faimess[;] (6) judicial economy[;] (7) undue delay[;] and (8) the dual threat of duplicative litigation and inconsistent verdicts.”Moulvi v. Safety Holdings, Inc., No. 3:20CV595, 2021 WL 4494191, at *6 (E.D. Va. Sept. 30, 2021) (quoting RAI Strategic Holdings, Inc. v. Altria, No. 1:20cv393, 2020 WL 6882646, at *2 (E.D. Va. Sept. 3, 2020) and Laston v. Clarke, No. I:16cv447, 2016 WL 11642365, at *3 (E.D. Va. Oct 14, 2016)).
III. ANALYSIS
Scottsdale argues that the Court must sever Count One and Two against Windward from Counts Three and Four against Scottsdale. Dkt. 18 at 5. Scottsdale asserts that the claims are distinct because they stem from two different contracts: (i) a Service Agreement between Windward and TKE; and (ii) an insurance policy between Windward and Scottsdale. Id. Scottsdale claims that evaluating the two contracts at the same time risks jury confusion. Id. Scottsdale also argues that trying all claims together would prejudice both Defendants because the jury would learn about potential liability insurance coverage. Id. According to Scottsdale, knowledge of an insurance policy could improperly influence the jury's decision. Id., at 6. For the reasons discussed below, Scottsdale's Motion will be denied.
In considering the eight factors detailed in Moulvi for reviewing a motion to sever, the Court finds that the weight of the factors supports, at this time, maintaining all four claims in the current action. First, while the claims stem from different contracts, the core of the issue in dispute is which party should bear the costs of TKE's legal defense in the Douglass Action. Simply put, the claims are not “significantly different from one another.” Moulvi, 2021 WL 4494191, at *6. The claims all arise out of the same “occurrence” and have common questions of fact in issue. Fed.R.Civ.P. 20(a)(2). Each claim seeks recovery for the costs TKE incurred in the Douglass Action. The Court could resolve all claims in determining that Windward, Scottsdale, or neither is responsible for TKE's costs. Thus, the claims are sufficiently similar to be heard together before this Court.
In its original Memorandum in Support and in its Reply, Scottsdale recognizes this as one of the factors to be considered. Dkt. Nos. 18 at 4; 24 at 2. Moreover, in its Opposition, TKE affirmatively argued that the witnesses and documents with respect to each claim would overlap. Dkt. 21 at 5. Nonetheless, Scottsdale failed to address this argument in either its Memorandum in Support or its Reply and does not argue that the claims are so distinct such that there would be no overlap in witnesses or documentary evidence.
Second, the witnesses and documentary proof are likely to overlap between the four claims because the claims stem from the same underlying action. This is a case-by-case determination based on the facts of the dispute. See, e.g, Equal Rights Ctr. v. Equity Residential, 483 F.Supp.2d 482,490 (D. Md. 2007) (declining to separate 300 similar claims on a motion to sever). Here, witnesses or documents that establish TKE's costs from the Douglass Action are likely the same for either claim. There may also be overlap in witnesses from Windward who can testify as to both the Service Agreement and the insurance policy. Some witnesses or documents may only be relevant to a particular claim; however, universal commonality is not required to maintain separate claims in the same action. See id. (finding some differentiation in witnesses did not support severance). There is sufficient commonality in the witnesses and documentary proof required to support joinder.[1]
The third Moulvi factor, prejudice to the party opposing severance, also disfavors severance. If the Court were to grant the Motion, TKE would have to pursue the claims in two different trials, with the attendant preparation and expense involved. This could include multiple depositions of the same witnesses for the different claims and adhering to two separate court calendars. See RAI Strategic Holdings, Inc., 2020 WL 6882646, at *6 (discussing potential prejudice from separating claims by creating two trials). The eighth Moulvi factor is also implicated here, as litigating two trials based on the same underlying facts could be duplicative or lead to conflicting judgments. Moulvi, 2021 WL 4494191, at *31. Witnesses may be called to testify twice, or the Court may be forced to re-adjudicate issues of fact that it has already resolved once in the other case. Dkt. 21 at 8-9. Thus, both the third and eighth factors weigh against severance.
Scottsdale's arguments focus on the fourth Moulvi factor: prejudice to the moving party if the Court does not sever the claims. Dkt. 18 at 5. Scottsdale argues that the disclosure of Windward's liability insurance is so prejudicial that it cannot be considered in reviewing claims one and two of the Complaint. Id. at 1. Virginia law traditionally eschews mention of insurance when determining liability; however, the Virginia courts have loosened this prohibition when the potential prejudice can be overcome. Compare Va. Code § 8.01-5 (B) (“Nothing in this section shall be construed to permit the joinder of any insurance company on account of the issuance to any party to a cause of any policy or contract of liability insurance . . . .”) with Medina v. Hegerberg, 245 Va. 210, 213 (1993) (holding that “when sufficient cautionary instructions are made by the court following a mention of insurance, we generally will not hold comments regarding insurance coverage to be reversible error”). This District has observed that “the mention of insurance coverage in a negligence suit is no longer reversible error in Virginia” and “there are occasions on which evidence regarding insurance will not constitute reversible error.” Hanna v. Graven, 262 F.Supp.2d 643, 647 n. 4 (E.D. Va. 2003) (citation omitted).
Although Virginia court decisions are not binding on this Court, the way Virginia courts treat insurance claims is persuasive in the analysis of prejudice to the Defendants.